Banker Wachovia Lifts Its Payout

By

Shirley A. Lazo

Updated Oct. 25, 2004 12:01 a.m. ET

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DIVIDEND HIKES ARE A FREQUENT occurrence among banks. Last week's standout was Charlotte, N.C.-based
Wachovia,
which on Monday boosted its quarterly common payout 15%, to 46 cents a share from 40 cents -- the second increase in 2004 and the fifth in two years. The first payment will be made Dec. 15 to investors on the books Nov. 30. Yield: 3.9%. Dividends have been ongoing since 1914.

On Oct. 15 Wachovia received Federal Reserve approval to acquire
SouthTrust Corp.
, with each share of SouthTrust to be converted into 0.89 of a share of Wachovia common. If stockholders of both companies give their nod on Oct. 28, the $14.3 billion deal will close around Nov. 1, and SouthTrust shareowners will be eligible for the new dividend. SouthTrust's current quarterly is 24 cents a share. If the transaction isn't consummated by then, SouthTrust may declare a dividend of about 41 cents, arrived at by multiplying the increased Wachovia dividend by the 0.89 share-exchange ratio of the planned merger.

Wall Street pros are high on the shares of Big Board-listed Wachovia. According to Zachs, there are 14 analyst Buy ratings on the stock, six Holds and one lone Sell. Wachovia shares change hands close to their 52-week high of 49.49, set March 11. Their 52-week low is 43.05.

The current Wachovia, with assets of $437 billion, was formed in 2001 when First Union bought the venerable company and took its name. With its SunTrust merger, Wachovia would become the nation's fourth-largest banking organization after
Citigroup,J.P. Morgan Chase
and
Bank of America,
with assets of some $471 billion and deposits of $288 billion. Wachovia retail banking offices can be found from Connecticut to Florida; its retail brokerage operations are nationwide. Third-quarter net rose 14% from the year-earlier level, to a record $1.3 billion, or 96 cents a share, on the strength of deposit growth and loans to consumers and midsize companies. It was the ninth consecutive quarter that Wachovia has posted double-digit EPS growth. The company set aside $63 million for bad loans, down 47%.

HOUSING STARTS FELL 6% IN SEPTEMBER, the first drop in three months and a bigger decline than expected. Single-family home construction was at the lowest level in 19 months, as gushing oil prices and slow job growth hurt demand. (Nevertheless, 2004 so far has the most starts in 26 years.) One of the top 10 U.S. homebuilders,
Ryland Group,
obviously doesn't think the housing market has topped out. Last Wednesday the Calabasas, Calif., company showed confidence by boosting its quarterly common dividend 20% and splitting its stock 2-for-1.

The payout hike-to 12 cents a share from a dime (which, in turn was increased last December from the two cents Ryland had been paying for six quarters) -- will be effective this quarter. The respective payment and record dates are Jan. 31 and Jan. 15. Dividends have been paid since 1975.

Meanwhile, Ryland will distribute new shares from its stock division on Nov. 30; the record date is Nov. 15. The company repurchased approximately 322,000 of its shares in the third quarter and has authorization to buy back another 654,000.

Traded on the Big Board, the shares currently are priced at about five points below their 52-week high of 94.60, set Sept. 22.

Ryland builds roughly 14,725 homes annually, ranging in price from $75,000 to over $767,000 (the third-quarter average was $257,000 ), and customers have their pick from some 2,400 plans. July-September net, which was a record for the period, surged 31% from the preceding year's showing, to $83 million, or $3.32 a share, on a 19% jump in revenues, to $1.03 billion. The company's order backlog was at a record at quarter's end of 9,057 homes valued at $2.5 billion, up 17.5% and 35.2%, respectively, from a year ago. Ryland expects to generate per-share earnings of more than $14 in 2005, beating the average Wall Street estimate of $13.25.

BACK IN MID-SEPTEMBER, much of this space was devoted to copper products maker
Mueller Industries
' special dividend of $6.50 a share in cash and $8.50 in principal amount of 6% subordinated debentures due 2014 for each common share. The stock, which goes ex-dividend on Wednesday, was then trading at 42 and change. It's down a few points because investors didn't like third-quarter results. But senior analyst Barbara Allen of Natexis Bleichroeder says fundamentals are strong and the stock is worth 45. So she sees the opportunity to get the big dividend at a reduced stock price before Oct. 27.

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